Hello again! We are coming to the end of the year and what a year it has been! Personally, professionally, and for the podcast things have move swiftly this year. Personally I broke my elbow playing basketball in May. In June I spent a week, as I always do, working for College board grading AP World history essays. In July I spent a week in Auburn at the Mises Institute and in August I presented a paper to the Pacific Coast Branch of the American History Association.
As for the podcast, we have moved deeper into season 2. Slowly but surely we are getting there. I hope to wind it all up in May, if possible, but that will mean getting ahead on writing episodes and releasing more than one per month at some point. Will that happen? Only time will tell. But we have that as our goal.
One thing that has been bugging me for a while is the apparent fascination that has arisen amongst the young with marxism and communism. I’m not sure what the fascination is, as these two (I guess you could consider them one and the same) ideologies are two of the most destructive forces ever unleashed on the world in the 20th century. For my purposes here I will consider them one and the same, just to make things easy.
What I feel is part of the problem is that history teachers, and I include myself in this category, have not done a very good job teaching the history of the 19th and 20th century. We allow students (actually I don’t, but I think a ton of us do) to say things like, “religion is the root of more wars and death than anything else.” Or, my least favorite, but believe it or not I hear it from time to time, “religion is the opiate of the masses.” Okay great, you can recite a quote (not perfectly translated from German but ok, I’m not going to quibble there) but how much thought have you give TO communism and what it means? It’s pros and its cons?
I’m not going to give you a break down of the pros, as you can find that just about everywhere (or the supposed pros). I am going to discuss some of its negatives. Strangely enough, if you were to look, there is a devastating critique of “socialism” or “communism” from the 1920’s written by Ludwig von Mises, one of the greatest, if not the greatest, economists and thinkers of the 20th century. In a series of lectures he gave in the 1950s, as well as the aforementioned article titled “Economic Calculation in the Socialist Commonwealth” Mises discusses the problem with Socialism from an economic standpoint. In the introduction to the lecture series (titled “Marxism Unmasked: From Delusion to Destruction” and available for free at mises.org) Richard Ebeling notes that as early as 1920, in the aftermath of WWI, Mises pointed out that socialism and its system of comprehensive government planning would create the worst tyranny ever experienced in human history. Further, with the end of private property and free enterprise, individuals would end up losing their motivation to work. Sound familiar? See the history of the Soviet Union and you will see how this is true.
Students today learn none of this. They do not learn the crimes of communism; the millions who died under the regimes of Lenin, Stalin, Mao, Pol-Pot, and Castro to name just a few. Further, then do not even learn the way a market economy works, and thus why socialism can never work. Just to briefly touch on this point Again, as noted in the introduction (he brilliantly sums up Mises work here) Ebeling says “In the market economy production is guided by the expected consumer demand of the buying public., Businessmen and entrepreneurs, in the quest to earn profits and avoid losses, must direct the resources at their disposal in a way that minimizes their costs of production relative to the expected revenues from supplying goods and services that consumers want to purchase.” The prices, in money, for both finished consumer goods (hats, jeans, iPhones) and the means of production are what facilitate the process. The prices for consumer goods tell entrepreneurs what consumers want (the price of the goods and the fact that the entrepreneur is making a profit).
To go one step further, “the prices for the means of production–land, labor, and capital– tell them the costs of producing these goods with different types of resources and raw materials in different combinations.” It is the job of the capitalist, or the entrepreneur, or Apple Inc. to select the proper mix of resources that minimizes their expense and allows them to bring goods to market in the proper quantities and qualities that are demanded by the consuming public. If they do so, they will make a profit. If they do not, they experience loses.
Finally, I want to address the misconception that the capitalist, in the words of Marx, exploits the workers. This is totally incorrect (sometimes they will also say the buyer is being exploited as well). First, the workers are engaged in a transaction with their employer. They employer is paying them for their services, the workers is selling his/her talents to the employer. This is a transaction and no transaction can take place unless both parties are, to some extent, satisfied. You aren’t going to work for nothing, and the employer isn’t going to pay over the odds for your services. As long as the employer values your services more than it values the $15/hour wage (or whatever wage the position pays) and as long as you value the money being offered more than you value your free time, a transaction can take place. No one was exploited.
Often Marxists argued (perhaps they still do) that the employee puts the value into the good, say for argument sake, the iPhone. The iPhone XR sells for what, $750? Give or take. The phone probably costs Appple maybe $100 to produce. So the Marxist argues that the extra value of the phone is put into the phone by the workers, but they are only getting $15/hour (or whatever they make I’m just using that as an easy number). A worker, lets say, can assemble 10 phones in an hour (probably not but again, just for arguments sake). Look at all that profit!!! The worker is being cheated! But is he? No. The worker is, essentially, offering the employer a discount on his/her services. The worker wants to be paid, for argument sake, weekly. But the production of the phone started in July. The items don’t go on sale until, let’s say, October 1. The workers don’t care when they go on sale or for how much they are sold, or even if they do sale. The workers want to get paid. Thus they are taking a discount on their wages. If they want, they are welcome to propose that they get paid when the units they assemble are sold, and thus they could get more (think of a commissioned salesman), but no one wants that. People want guarantees (thus commissioned sales jobs are few and far between today).
Central planning can not take all of this into account. As Mises showed, the end of private property and prices, the end goal of socialism, means none of this works. Without private property there is no way to know the real and actual opportunity costs between the different alternative uses for which various inputs to the production process might be applied. Thus central planners can never know whether or not they are misusing and wasting societies resources.
Anyway, this blog was far longer than I anticipated. I hope it wasn’t too boring. Happy Holidays to you and yours.